CEOs cut reliance on bank loans on ‘sticky’ rates claim

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Corporates are increasingly financing operations from internally mobilised resources, reducing reliance on bank loans and other external funding avenues, a Central Bank of Kenya (CBK) survey has revealed.

Chief executives of private companies attribute their decision to “sticky” lending rates despite a gradual reduction of the apex bank’s indicative rate.

According to the survey conducted last month, some 49.7 percent of respondents rely on internally-generated funds, up from 38.1 percent a year earlier.

This came as the number of companies whose executive heads indicated relying on bank loans decreased to 33.7 percent, from the 40.1 percent of respondents recorded in July 2025, signalling reduced dependence on commercial lenders.

The reduced appetite for bank loans among corporates came despite a sustained drop in lending rates on the back of an easing monetary policy, with a section of respondents in the CBK survey faulting lenders whom they say have failed to pass on the gains of cheaper credit to them.

“Some respondents cited stickiness in commercial bank lending rates despite the easing of policy rates,” the CBK notes in the report.

The average lending rate by commercial banks stood at 14.3 percent in July 2026, decreasing from 14.4 percent in June and 17.2 percent in November 2024.

The CBK cut its benchmark Central Bank Rate (CBR) to 8.75 percent in February this year and has maintained it at that level in successive monetary policy meetings, down from 13 percent at the start of the monetary easing cycle in August 2024.

The CBR cut was targeted at stimulating lending to the private sector, the regulator said.

The latest CBK survey further shows that companies’ reliance on private equity funding declined to 9.6 percent from 12.9 a year earlier, while reliance on new share issues and initial public offerings dropped to 1.1 from 2.7 percent.

The survey targeted CEOs across several sectors, including wholesale and retail trade (17 percent), professional services (15 percent), tourism, hotels and restaurants (13 percent) and financial services (12 percent).

Others were healthcare and pharmaceuticals (11 percent), agriculture (seven percent), manufacturing (seven percent), ICT and telecommunications (four percent), transport and storage (four percent) and real estate (four percent).

“The majority of the respondents (76 percent) were domestically-owned private companies, while the rest were foreign-owned private firms (17 percent), publicly-listed domestic firms (one percent), publicly-listed foreign firms (three percent) and government-owned entities (one percent),” the report added.

According to the survey, chief executives identify elevated energy prices, geopolitical tensions and global macro-economic volatility as the main threats to the growth and expansion of their companies over the 12 months to July 2027.

“Respondents reported that these risks could raise production and operating costs, disrupt supply chains, weaken demand and contribute to inflationary pressures,” reads the survey.

“Nevertheless, firms intend to mitigate the constraining factors by improving cost and risk management, adopting technology, automation and innovations and diversifying operations.”

CBK data shows that lending to households and businesses by commercial banks hit a 28-month high in June.

The private sector lending performance in June and July 2026 marked the first double-digit growth since February 2024.

“Growth in commercial banks’ lending to the private sector remained strong at 10.2 percent in July 2026 and 10.6 percent in June 2026 compared to a contraction of 2.9 percent in January 2025,” the CBK said following a monetary policy meeting.

“Growth in credit to key sectors of the economy, particularly trade, building and construction, agriculture and consumer durables, remained strong, reflecting improved demand for credit in line with the decline in lending interest rates.”

Reporting originally appeared via Business Daily. Read the full source for additional context.